Question

A company forfeited 500 shares of ₹10 each, fully called up, for non-payment of allotment money of ₹3 per share and first and final call of ₹2 per share. The amount credited to the Share Forfeited Account is:

• A. ₹1,000
• B. ₹2,500
• C. ₹1,500
• D. ₹5,000

Hint:

Share Forfeiture Account always contains the amount already received from shareholders before forfeiture. Formula: Share Forfeiture Amount = (Number of Shares) × (Amount Received per Share)

Answer 1

The Correct Option is B

Concept: When shares are forfeited, the amount already received from shareholders is transferred to the Share Forfeiture Account. The Share Forfeiture Account represents the amount paid by shareholders before forfeiture and serves as a capital gain for the company. Therefore: \[ \text{Share Forfeiture Amount} = \text{Called-up Value} - \text{Unpaid Amount} \] multiplied by the number of shares forfeited.

Step 1: Determine the called-up value per share.
The shares are: \[ ₹10 \text{ each} \] and are fully called up. Therefore called-up value per share is: \[ ₹10 \]

Step 2: Calculate the unpaid amount per share.
Non-payment includes: Allotment money: \[ ₹3 \] First and final call: \[ ₹2 \] Total unpaid amount: \[ ₹3+₹2 = ₹5 \]

Step 3: Calculate amount already received per share.
Amount received per share: \[ ₹10-₹5 = ₹5 \] Thus each shareholder had paid: \[ ₹5 \] before forfeiture.

Step 4: Calculate total amount transferred to Share Forfeiture Account.
Number of shares forfeited: \[ 500 \] Amount received per share: \[ ₹5 \] Therefore: \[ 500 \times 5 = ₹2,500 \]

Step 5: Verify through journal entry.
At forfeiture: \[ \text{Share Capital A/c Dr.} \quad ₹5,000 \] \[ \text{To Share Allotment A/c} \quad ₹1,500 \] \[ \text{To Share Final Call A/c} \quad ₹1,000 \] \[ \text{To Share Forfeiture A/c} \quad ₹2,500 \] Hence the credit to Share Forfeiture Account is: \[ ₹2,500 \]

Step 6: State the final answer.
\[ \boxed{₹2,500} \] Hence Option (B) is correct.